Stasis is death for any economic system. A relentless drive towards efficiency is the only hope for survival. Inefficient actors must give way to more efficient ones. Propping up domestic automakers throws good money after bad, and if we keep doing that enough, there will be no more good money to throw.

All that said, the US can still make very good automobiles. Mercedes, Honda, Hyundai and Toyota in my state alone. Droves of people line up for jobs at their factories, but none of their plants have the UAW. You can not pay people not to work and expect to be able to compete.

My solution to the immediate problem of low sales is a coordinated sales tax holiday for the purchase of new cars.

Seems to me that this type of action would follow the Bernanke approach to stimulus of being timely, targeted, and temporary. It’s still the government’s balance sheet that takes the hit in lost tax revenue, but it allows a boost to the entire chain of businesses involved, from dealers to lenders, to manufacturers.

It’s a risk for consumers to commit to a new car purchase and the only way to reduce the risk is to reduce the amount of money on the line. Sure, the sticker price could be lowered, but that doen’t help the dealer/manufacturers. A sales tax holiday reduces the total cost, but allows the dealers and manufacturers to get a better price. It also avoids the moral hazard of singling out US auto makers which would be a protectionist mistake considering the amount of business foreign auto makers do in the this country now.

If unions are the reason for high quality, then how do the foreign manufacturers make such a good car in the southern USA without union membership?

When Obama comes into power in January, what will be the reason the big 3 change to make a more competitive product if they’ve already been guaranteed a financial backstop by him in the run up to the election?

The UAW contract as described tonight on CNBC, is better than every other private labor contract in the US…why should we contribute to that, as taxpayers? Taxpayers should bail out workers who are getting a much better deal than they themselves have at their place of employment?

Of course management should be replaced. Is anyone but Wagoner against that?

Lot of emotional response tonight..

I’m kind of astonished at how easily so many here are ready to write off such a gigantic number of families who signed contracts in good faith. But hey, I guess it’s a sacrifice they’ll have to make. So that we all may be reminded of the law of the jungle. The carrot of pecuniary reward and the stick of personal economic disaster! If it worked for Ricardo 200 years ago it’ll work for them too!

I agree that these companies are truly screwed up. There’s no doubt they have to change radically. But our expert fabricators and their families aren’t responsible for that. They do a difficult, specialized job and I’m glad they get paid well and taken care of.

You are missing the forest for the trees.

We cannot have GM failing its bond obligations right now and “restructuring” to put thousands out of work. What’s good for GM on its own is not good for the system as a whole at this time; a pro-active government might have forced this sort of approach three years ago, when it was plenty clear that the automakers could implode under stress and had outsized costs, including some imposed by the govt (see dealership laws).

Forcing the autos into Ch 11 now is a fundamentalist approach. Instead we need to create an orderly unwind to our credit issues. Auto company failures now will put incredible pressure on the supply chain and create mass unemployment; even worse, systemically, it will even further impair creditors, who don’t want equity, and deepen the credit crisis–which is still possible, and then impair totally unrelated businesses. We need creditor relief now. Moreover, with bankrupt consumers and creditors, where will the money come from for recovery?

Barry, having everyone fail at once is a horrible mistake, similar to Rumsfeld’s chaos approach in Baghdad during the looting period. We don’t need to feed the auto guys 25B; we need to give them 50B, while using the tax code to penalize outsized wages rather than wage controls. It may prove to be wasted money in a few years–fine. Let’s deal with that when our credit system is healthier and the mortgage issue in the past.

We need to flood our system with money, which is fast being destroyed. We need to help our creditors. We need to keep people employed. And we need a massive fiscal stimulus for households–$20,000 per adult citizen over two years, against future tax obligations on gas, electricity, net worth, and high incomes. We need to risk money creation–now is no time to worry about inflation.

Now is the time to go big. Whether the autos can survive long term begs the real question, which is: can we get money into our economy and how fast and how relentlessly. We are the spender of last resort; the rush into dollars reflects this reality. We’ve got to start spending.

Remember–it wasn’t until the big spending for WWII that we really came out of the GD. We’re in the same situation. We’ve got to get wild and show some irresponsibility–we need people to believe in higher prices again down the way.

As I have stated before, strings need to be attached to any money given to anyone. In the Big 3’s case money should not be used to pay old debts or to make 0% financing available. The issue is, that we do not need another few million laid off. All they will do is compound the problems our economy is now experiencing. It will cost us (taxpayers) alot more to go down that road. You’re right; most of the posts here were not in favor of giving away money to banks either. My bad for drawing that inference. making that connection. Sorry to hear about losing your homebuilding position. Hopefully, you have a better job or as good a one now.